Western Oil and Gas Producers Are Ramping Up

After renewed fighting in the Middle East sent oil prices skyward last month (before cooling again), commentators we follow rehashed warnings of energy supply shortages, presuming shipments from the Red Sea and Hormuz were at risk.^[i] But our research finds prices are signals, and when elevated, responses typically follow. Today, more reports are emerging that producers outside the Middle East—especially in the Americas—are ramping up production and infrastructure buildouts. Whilst some of this will likely take time to hit the market, we think it is more evidence negative speculation we have seen around supply is bullishly false.

First and foremost, America’s oil production is reaching record highs (and rising) today, which looks unlikely to abate soon.^[ii] But it isn’t just the US: One International Energy Agency (IEA) study suggests production from the “Americas quintet” of the US, Canada, Brazil, Argentina and Guyana will “more than cover” rising global demand through at least 2030.^[iii] Whilst that is just a forecast, data seemingly support the directional view. Take Brazil. Its oil production rose roughly 19% y/y (4% m/m) in June, reaching a record 4.5 million barrels per day (bpd).^[iv] For context, Brazil averaged around 3.8 million bpd in 2025, so this represents a hefty increase.^[v] Much of this output stems from offshore production in unconventional fields—the country’s deepwater pre-salt deposits.

Further supporting future supply, North American producers have added 65 new rigs this year, with 39 in the US and 26 in Canada.^[vi] And whilst our research suggests rig counts aren’t a perfect indicator for future supply, we think adding more infrastructure supports producers’ ability to grow output should prices remain elevated. In Canada, the newly completed pipeline connecting Alberta to Pacific energy outlets can help service demand from Asia, too.^[vii] War-related Middle East disruptions—be they from Iranian forces or Houthi rebels—can’t impede these flows. Our overarching point: This added production can eventually fuel exports flowing without regard to the Strait of Hormuz, the broader war or even Russia.

Looking longer term, there are other underappreciated projects not receiving much coverage in publications we follow. Canada is leading the charge with two: One is a drilling resurgence in the long-overlooked Belly River formation, in an area called Willesden Green located near the Rocky Mountains.^[viii] Here producers are pivoting from gas to oil drilling in the most active first six months in 14 years, with 15 drilling licenses granted year to date. This is a shale gas play tapped by fracking. It isn’t a major source of oil or gas—but in our view, it is part of an overall picture that shows producers are advancing projects to boost oil output.

Canada is also planning to expand its pipelines—including a proposed 1 million bpd expansion of the line to British Columbia’s coast—to make it easier and more profitable to move Canadian product from Alberta’s oil sands to buyers, particularly in Asia.^[ix] And because the thick, heavy crude extracted here must be blended with ultralight crude or condensate before it can flow through a pipeline, the project may also promote further light-oil drilling in the US or Canada. The latest projections call for Western Canadian heavy output rising by as much as two million bpd over the next decade.^[x] So whilst this longer-term project likely won’t affect supply over the next 12 or 18 months, we think it is a notable development in the Great White North’s longer-term effort to paint itself as a “safe hand” supplier, free of Middle Eastern entanglements.^[xi]

Across Canada’s southern border, US natural gas production is also at record levels—and rising.^[xii] This offers European buyers an abundant non-Hormuz source to tap for liquified natural gas (LNG) stockpiling—something to keep in mind if headlines speculate on eurozone natural gas shortages this winter.

Even with oil prices off the $100 per barrel mark we find many associate with economic negativity, we think oil prices hovering in the $70s or $80s should be enough to support this continued growth. Now, production growth and investment could cool if prices fall further. But for now, we think they seem sufficiently elevated to extend this ramp-up—especially with today’s uncertainty in the Persian Gulf region. Even beyond simple prices, many nations across Asia and Europe are seeking stable supplies amidst wartime uncertainty (in Russia as well as the Middle East), so output from the Americas may be increasingly in demand.

Now, in our experience, investors often presume rising output must be great for Energy stocks—as we found was often the case during America’s early 2010’s shale boom. Not so—our research finds prices matter much more than production volumes. Today, we suspect there will be energy price volatility. But with production quietly rising outside the war-torn areas—which seem less disrupted than projected anyway—we think it is unlikely oil prices rise materially from here. That suggests to us today’s rising North American output is part of an extant headwind for Energy stocks.